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News : Irish Last Updated: Jan 20, 2011 - 6:42 AM

VHI - - the Irish State health insurer - - warns of report recommendations that would be transition to a US-style system
By Finfacts Team
Jan 19, 2011 - 2:43 PM

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VHI, the Irish State health insurer, today warned that if recommendations contained in a report into the way it handles claims were implemented, doctors would lose the right to determine the type of care patients required and it would be transition to a US-style system. The comments were in response to a  US consultancy report that was commissioned by Health Minister Mary Harney.

Harney said on Tuesday that the report had found the VHI was paying out too much to hospitals and could make savings of up to 10% if it managed its dealings with them more aggressively.

The VHI said the Milliman Review contains commercially sensitive information and it is agreeable to the publication of an agreed redacted version of the report which does not contain this information.

It says Milliman’s primary recommendation is that VHI should transition to a US style utilisation management company and Milliman has expressed the view that health care savings could be achieved by VHI becoming a US-style  utilisation company. Effectively what this means is that VHI would transition from an organisation which currently funds the  needs of customers to one that actually determines what level of care and the type of treatment which customers would receive. So, rather than the consultant in a hospital determining the care pathway for patients, VHI  would enter into new agreements with consultants and hospitals and its customers whereby the care pathways would ultimately be determined by VHI.

Becoming a US-style  utilisation company will require VHI to invest in and set up significant pre-authorisation processes, concurrent review processes and post care review processes. Pre-authorisation would require the consultant treating the customer to obtain VHI’s sign-off on the proposed care pathway and in the event that VHI  did not sign-off, the customer’s costs would not be reimbursed. Concurrent reviews would involve VHI staff continuously monitoring the health status of patients to determine whether they should still be treated and post-care reviews would involve VHI  examining whether the patient should have received the treatment.

The VHI said the board carefully examined the Milliman Review and concluded that Milliman had not demonstrated that the theoretical savings were either tangible or achievable in the medium term. It also concluded that transitioning to a US-style  utilisation company would require a very significant upfront investment and would be a long and complex journey. It said US health insurers internal administration costs per customer currently average between €230 to €300 per customer and these costs are 4 to 5 times the level of VHI's. Milliman acknowledged that VHI’s internal costs would increase.

Jimmy Tolan, chief executive of VHI said: “VHI  faces very significant  funding challenges over the next ten years as our customer base continues to age. We anticipate that we will have to deliver significantly more care in critical  areas such as cancer, cardiac, orthopaedic and managing chronic conditions. We welcome all constructive inputs including input from Milliman and the Department of Health & Children as we grapple with the challenge of funding our customers’  needs."

If reports would solve the black hole that is the Irish  system where wealthy medial consultants straddle the public and private health systems, there would have been a solution a long time ago.

The next minister will likely commission a report from a European consultancy.

What is clear is that the current Health Minister, Mary Harney, will leave office in coming months after a period of over 6 years and a record of failure.

VHI says it currently spends 96% of its customers’ income in meeting the healthcare needs of its customers - - which has required 2011 premium hikes of up to 45%.  The key areas of expenditure on behalf of customers are in the following healthcare areas:

Type of Care

Expenditure in 2009

Cancer and related care


Cardiac and related care


Orthopaedic and related care


Digestive care


Symptoms and general ill health


Nervous system care


Mental health care


Maternity care


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